At the risk of sounding like a nerd, I found myself taken this weekend by an article in Stanford Social Innovation Review on impact measurement. It is entitled, “The Next Frontier in Social Impact Measurement Isn’t Measurement at All”.
The authors, Kate Ruff and Sara Olsen, have coined the term bounded flexibility to refer to the need for measurement that allows flexibility within an agreed-upon range in choosing metrics to demonstrate social impact.
The tendency now is to force-fit social enterprises to use standard metrics across impact investors’ portfolios. This approach doesn’t takes\ into account that, “enterprises differ in mission; theory of change; or socio-economic, cultural or geographic context”. The result is that, “Common measures ask the wrong questions, measure the wrong things, and miss the real impact.”
The suggestion of the authors is that, as with the traditional investment industry, you allow flexibility in measures but develop an intermediary level of analysts to interpret those metrics on behalf of funders and investors. The result is that you can “achieve comparability by focusing on the analytical skills needed to compare social impacts without mandating a rigid set of required metric.” You then generate more meaningful measures that can be used not only by funders but enterprise management to drive the achievement of mission.
There remain huge challenges for social ventures setting metrics for social impact. Most don not do so. The cost of professional consulting services to help with impact metrics is high and the time it takes to think through appropriate measures can be crippling for a startup social enterprise.
However, there is much work on going globally. Organizations like The Global Impact Investing Network (GIIN) and MaRS Centre for Impact Investing (CII) in Canada are working to create communities of practice on social metrics that should make the skills more accessible. I hope.